Seismic Looking for a New Image

It may not be time to pop open a bottle of the celebratory bubbly,
but optimism appears to be supplanting much of the industry's rampant
pessimism of the past few years.

On the investment side, there's Berkshire Hathaway's attempted
entry into the seismic industry via its proposed buyout of Seitel,
albeit an event recently thwarted by the bankrupt company's shareholders.
The good word from John Geddes at SCF Partners investing firm, which
currently is invested in two seismic companies, is there's evidence
the E&P industry is craving new technologies and methodologies
for shooting and processing seismic data.

It appears they're willing to loosen the purse strings to encourage
these developments.

"We are seeing budget increases of 200 to 300 percent for new
seismic in the Gulf of Mexico," said Mick Lambert, president, GX
Technology (GXT).

In fact, there's talk on the street of a whole new seismic industry
emerging to meet the growing demand for a more sophisticated seismic
product, i.e., one that provides insight into reservoir complexities
like never before.

It's an image thing.

"There's been a huge shift in the industry, which is in a state
of flux and is driven to change," Lambert said. "Contractors used
to be data collectors, but now they realize they need better quality
imaging and acquisition.

"We have got all that we can out of spec-driven 3-D, and now we
must go to the next level," Lambert continued. "The new focus is
on the result — the deliverable is no longer the data, but the
best possible image, which is the real value in the data."

So Long to Spec Surveys?

This line of thought dovetails with that of Bob Peebler, president
Input/Output.

"When I look at where future oil and gas is going to be found,
and also the challenge of getting more out of reservoirs that already
have been found, I think geophysics will have an even more significant
role," Peebler said, "especially in the exploitation and reservoir
monitoring world, because we need an even better understanding of
the whole reservoir to be effective."

The next technology wave to come will be more complex than 3-D,
e.g., 4-D (time lapse) and multi-component, Peebler noted. This
will be driven by the need to address an array of issues including
ultra-deep targets, elusive stratigraphic traps and plays, fluid
type identification and fluid movement over time.

Except for a few places in the world, don't look for many future
seismic data to be acquired via the once wildly popular huge spec
data surveys that were often implemented merely to keep excess capacity
working.

That was a business model that came back to bite some companies
in the form of massive write-downs of equipment and data stores.

The good news: Big, multi-client surveys led to a lot of 3-D coverage,
which resulted in finding a lot of oil and gas.

The bad news: Spec survey design by definition is not problem
centric. Data quality may be good, yet not fit for the specific
purpose.

Image Caption

Recent times have been hard for the seismic industry -- and for crews, often increasingly harsh -- but optimism appears to be on the rise thanks to new technology and new business strategies.Photo courtesy of WesternGeco

It may not be time to pop open a bottle of the celebratory bubbly,
but optimism appears to be supplanting much of the industry's rampant
pessimism of the past few years.

On the investment side, there's Berkshire Hathaway's attempted
entry into the seismic industry via its proposed buyout of Seitel,
albeit an event recently thwarted by the bankrupt company's shareholders.
The good word from John Geddes at SCF Partners investing firm, which
currently is invested in two seismic companies, is there's evidence
the E&P industry is craving new technologies and methodologies
for shooting and processing seismic data.

It appears they're willing to loosen the purse strings to encourage
these developments.

"We are seeing budget increases of 200 to 300 percent for new
seismic in the Gulf of Mexico," said Mick Lambert, president, GX
Technology (GXT).

In fact, there's talk on the street of a whole new seismic industry
emerging to meet the growing demand for a more sophisticated seismic
product, i.e., one that provides insight into reservoir complexities
like never before.

It's an image thing.

"There's been a huge shift in the industry, which is in a state
of flux and is driven to change," Lambert said. "Contractors used
to be data collectors, but now they realize they need better quality
imaging and acquisition.

"We have got all that we can out of spec-driven 3-D, and now we
must go to the next level," Lambert continued. "The new focus is
on the result — the deliverable is no longer the data, but the
best possible image, which is the real value in the data."

So Long to Spec Surveys?

This line of thought dovetails with that of Bob Peebler, president
Input/Output.

"When I look at where future oil and gas is going to be found,
and also the challenge of getting more out of reservoirs that already
have been found, I think geophysics will have an even more significant
role," Peebler said, "especially in the exploitation and reservoir
monitoring world, because we need an even better understanding of
the whole reservoir to be effective."

The next technology wave to come will be more complex than 3-D,
e.g., 4-D (time lapse) and multi-component, Peebler noted. This
will be driven by the need to address an array of issues including
ultra-deep targets, elusive stratigraphic traps and plays, fluid
type identification and fluid movement over time.

Except for a few places in the world, don't look for many future
seismic data to be acquired via the once wildly popular huge spec
data surveys that were often implemented merely to keep excess capacity
working.

That was a business model that came back to bite some companies
in the form of massive write-downs of equipment and data stores.

The good news: Big, multi-client surveys led to a lot of 3-D coverage,
which resulted in finding a lot of oil and gas.

The bad news: Spec survey design by definition is not problem
centric. Data quality may be good, yet not fit for the specific
purpose.

"I believe the future world will be more and more driven either
by proprietary shoots in existing fields where you're trying to
better zero in, or funded group shoots," Peebler said, "where you
design the survey more fit for purpose for the problem at hand."

These so-called "designer shoots" are a hallmark of GXT, which
Peebler noted is pushing the envelope in the Gulf of Mexico with
a whole new model.

This is an all-different breed of cat in the private full-service
seismic contracting milieu.

Think "asset-lite."

The 13-year-old company, which has doubled its head count over
the last 18 months, doesn't own boats and crews, opting to sub out
this end of the business.

"Besides the financial burden that comes with depreciating heavy
iron, shooting parameters often must be compromised by owning a
particular type of boat," GXT's Lambert said.

"If you're unencumbered by the need to keep your boats shooting,"
he said, "you're free to focus your efforts solely on survey design,
execution and imaging by organizing the right technology for the
job. You never have to shoot for the sake of shooting."

About 80 percent of the cost an oil company incurs for the seismic
data used to create the image is expended on logistics, i.e., moving
the cable, according to Lambert. Without a boat inventory, it's
possible to engineer out much of the logistics costs and bring in
advanced technology in the form of better quality data for a superior
image, yet for the same dollars.

Eye On the Target

The modus operandi at image-driven GXT is to reverse engineer
the way a survey is acquired — in other words, set your eye on
the target and work back from there.

Besides 3-D, this methodology was used by the company for its
long offset 2-D GulfSpan program to assist E&P companies in
the move back to the basics to try to better understand the depositional
systems in the Gulf as they pursue the deep expensive shelf gas
play.

"The important thing is, to build the final migrated model you
need to understand the subsurface geology," Lambert said. "You must
design the survey knowing fully what you expect out of it at the
end of the day, using the specific design parameters required to
achieve that result.

"Better subsurface images are key to reducing drilling risk, which
is particularly crucial in the case of deeper water and deeper targets,"
Lambert added. "You plan the whole survey process around getting
the best image, and all things become subservient to that.

"You then rent the crew when you need it and rent from those that
have the best price point."

The laying off of seismic risk has gone full circle, noted Piers
Gormly, GXT's vice president of marketing, "from oil company to
major contractor to where we now have people who specialize in being
the Avis of the boat world who give us what we need when we need
it.

"Instead of getting all dressed up with nowhere to go," Gormly
said, "we don't get dressed up unless we have somewhere to go."

There's different strokes for different folks.

On one hand, Steve Ludlow, president of Veritas, concurs with
Lambert.

"You do have to have everything planned from the beginning," Ludlow
said. "It must be acquired with the correct parameters, processed
with the correct parameters and interpreted with the ultimate image
in mind. That is the ultimate understanding."

On the other hand, Ludlow said Veritas charters its boats over
a three to five-year period and sees no advantage to renting vessels.
He noted the company has all its capacity working today, including
land.

Ludlow's advice to stay the course: "You must pick a niche in
this business."

Perks of the Privates

Some companies were founded on a niche technology and never strayed,
making it work regardless of the ups and downs indigenous to the
industry.

"Radio frequency (RF) technology defined our niche way back,"
said Steve Mitchell, vice president of operations at Fairfield Industries,
which historically has focused principally on acquiring and processing
seismic data in the shallow waters of the Gulf of Mexico.

"We're not bound by RF," Mitchell said, "but it fits, particularly
with our emphasis on the new deep shelf play."

Fairfield's early recognition of deep natural gas potential in
its longtime area of operations kick-started a period of expansion
just as many of its seismic brethren were contracting.

"We started shooting deep shelf, long offset 3-D before the MMS
granted royalty relief and back when natural gas was about $3,"
Mitchell said. "It would have been easy for us to panic and watch
other players and shut down, but we persevered, and now have over
400 new blocks of these data.

"There was method to our madness," he noted.

Mitchell won't argue that it's advantageous to not have to answer
to Wall Street.

"We have the luxury to think long term and not quarterly," he
said.

Indeed, the industry's trend over the last few years is away from
the once-popular public offerings, where even the smallest new company
rushed to get its name on the Big Board along with the Wall Street
darlings.

Gormly sums up the negative and the positive succinctly:

"The exploration world is not a quarterly world," he noted. "As
a private company we can do what we want."

Outsourcing's Future

As the seismic business in general evolves to meet new needs and
companies search for ways to produce high-value solutions in the
most efficient and cost-effective manner, outsourcing plays a prominent
role — some of it a bit more offbeat than the rest.

For instance, a low-profile yet potentially huge shift in the
seismic industry is the increasing presence of Chinese and Russian
seismic entities vying for work in the Gulf of Mexico and elsewhere
(see related story page 8).

Although these groups are said to be a bigger force in the land
market, boats and crews are for hire in the marine market at competitive
prices, which has the potential to be a boon to companies intent
on engineering out many of the logistics costs of marine surveys.

Iron comprises only part of the outsourcing action.

At I/O, for example, much of the equipment manufacturing activity
is increasingly being done through outsourcing partners. And in
the burgeoning high performance cluster computing arena, outsourcing
has become almost de rigueur to cost-effectively harness the computer
power needed to more quickly run complex algorithms and better extract
information from the seismic data.

Computing-on-demand is rapidly becoming the solution-of-choice
to cope with the peaks and valleys of demand.

"We set up a facility the companies are able to access over the
Internet," said Dave Turek, vice president of deep computing at
IBM. "And since the technology is Linux and clusters, it's similar
to what they're using.

"They effectively send their own programs and data into our facility,"
Turek said, "and they operate it as an adjunct or complement to
what's installed in their own facilities. This gives them the ability
to respond to the urgent types of requirements where they suddenly
need extra capacity but not on a permanent basis.

"You just get on the Internet, get access and go," Turek said,
"and you pay only for what you use."

Large scale processing technology on clusters became a mainstay
early on at GXT, which now has a deal with IBM that complements
its on-site facility. Lambert envisions a day when the on-demand
model may become so cost effective that it eliminates the need to
maintain the large in-house computing room.

Key to Survival

With the seismic industry at the mature end of the more than 20-year
3-D technology cycle, speculation is rife over how some of the existing
companies, particularly the largest ones, will cross the bridge
between this cycle and the next technology wave to come.

"If you went back and looked at the leading companies in 2-D and
then looked at the leaders in 3-D, many did not make it across that
bridge," Peebler said. "The few that did had to reinvent themselves.

"It's fair to say that the largest companies that may be in a
leadership position may or may not be the people who blaze the future

"They're encumbered to an extent by the assets they own which
are geared more for the past than the future," he noted. "Still,
I never discount companies like that because they have good people
and good resources."

The bottom line: Opportunity awaits those folks who strategically
position themselves with the right business model.

"There's no lack of demand for seismic," Lambert said. "The key
is getting the right seismic, using the right approach and understanding
what the client wants the seismic to do."